J.P. Morgan Ups Sirius to Neutral

A 29% slide in Sirius Satellite ( SIRI) since mid-December has left the shares reasonably priced, J.P. Morgan said in upgrading the stock to neutral from underweight Monday.

The brokerage said Sirius' receivers are selling "near parity" this month with rival XM Satellite ( XMSR), according to its store checks. Both have scaled back rebates, easing fears of "destructive competition."

Sirius closed at $5.05 on Friday. In recent premarket trading, the shares fetched $5.15. J.P. Morgan said in its note that the current price is within the range implied by its discounted cash flow analysis.

J.P. Morgan said it expects Sirius' subscriber growth to be 765,000 in the first quarter, up 32,000 from its last estimate. It said a recent deal with automaker Volkswagen/Audi should slightly raise long-term subscriber growth.

"If Sirius can maintain retail sales parity near XM after March, it could top second-half of 2006 retail subscriber growth estimates, in which we assume year-over-year declines due to a fading of the Howard Stern bulge," the brokerage said. "However, if OEM conversion rates and RIAA rights fees play out more negatively than we assume, we could return to a more cautious stance.

"We continue to see 2006 as a transitional year. Growth remains strong, but the story has become less novel."